Oil Down With Eyes on Ample supply, Dollar's Bounce

Oil futures pulled back on Thursday as ample global supply weighed on prices while Brent's front-month June contract headed to expiration.

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Trading was choppy as market participants tried to square bullish factors, including recent drops in U.S. inventories, spot demand for crude in Asia and Middle East unrest, with basic supply fundamentals of historically high inventories and ample production.

"The market is really in a pause," said Harry Tchillgurian, analyst at BNP Paribas. "The longer the price stays up, the more you invite supply to come back to the market."

Expiring front-month Brent June crude fell 22 cents to settle at $66.59 a barrel. July Brent fell 57 cents to settle at $66.70.

U.S. June crude fell 62 cents to settle at $59.88.

U.S. RBOB gasoline futures rose 1.70 cents to settle at $2.0575 a gallon and ULSD futures managed a 0.05 cent gain to $2.0056.

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Falling U.S. refined products inventories and falling weekly jobless claims in the United States supported products futures. [EIA/S]

"Better jobless claims data helped and U.S. gasoline demand is at 9.02 million barrels per day in May, ahead of the summer driving season," said Carl Larry, director at Frost and Sullivan.

Dollar-denominated crude oil was lifted by a weaker U.S. currency in early trading, before the dollar recovered from lows. [.DXY]

Oil also briefly received support from news that Iran's Revolutionary Guard fired warning shorts over a Singapore-flagged oil products tanker in international waters in the Gulf.

Iran appeared to be trying to intercept the ship in order to settle a legal dispute, U.S. official said.

While crude stocks in the United States fell for a second straight week, by 2.2 million barrels, following four months of steady gains, inventories were still almost 90 million barrels higher than this time last year. [EIA/S]

A surprise increase in output in March from the No. 2 U.S. oil-producing state, North Dakota, added to supply concerns. The International Energy Agency also warned on Tuesday that the global oil glut is building.

China, the world's top energy consumer, lost more economic steam in April despite easing monetary policy, while Europe's largest economy, Germany, slowed in the first quarter. In the United States, retail sales were flat in April, curbing hopes of a sharp rebound in growth in the second quarter.

(By Robert Gibbons; Additional reporting by Libby George in London and Florence Tan in Singapore; Editing by Vincent Baby, William Hardy, Meredith Mazzilli, Chris Reese and Richard Chang)